Apple isn’t going to take a gamble: The consequences of the new payment-processing law in the App Store and in South Korea

Epic Games CEO Tim Sweeney was one of the first to call out Apple’s changes as “anticompetitive,” adding the App Store policy “totally undermines” the court order. He says that it kills price competition by prohibiting developers from offering in-app purchases for a lower price. Not only do developers have to pay commissions to third-party payment processors but they also have to pay Apple.

Regulators aren’t happy with the policies Apple has implemented elsewhere. In 2022, Apple started letting dating app developers in the Netherlands use alternative payment options with the same 27 percent tax. The Dutch regulators fined Apple $55 million because they failed to comply. Apple also implemented a similar policy for all app developers in South Korea, where a new law prevents Apple and Google from forcing developers to use first-party payment processors. Apple and Google were warned by South Korea about fines for violating the new payment rules.

For any consumers brave enough to keep going and make a purchase, Apple will collect up to 27 percent of the revenue, via a newly created fee that extends the much-loathed levy that previously had been placed only on in-app purchases. Developers will have to provide “periodic accounting of qualifying out-of-app purchases” and allow Apple to audit their records, though it acknowledges that “as a practical matter … collection and enforcement will be exceedingly difficult and, in many cases, impossible.”

Apple’s tweak allows developers selling apps in the US to link from their apps to purchase pages on their own websites. This practice was banned due to the fact that it would force developers to pay up to 30 percent of their revenue to Apple. To offer in-app purchases through the billing system of Apple, developers need to apply for permission and link out to alternative purchase options on their websites. They must certify that they have procedures for handling billing complaints and that their payment processors are in compliance with certain industry standards. Apple needs to approve the wording used in the alternative purchase options. When users click on those links, they will see a full-screen warning saying that they are taking a risk going into a world where Apple doesn’t apply.

The US Supreme Court turned down an appeal of its losses by developer Epic Games on Tuesday, clearing the way for Apple to go ahead and make a new phone. That means up to 30 percent of app developers’ sales will continue to flow into Apple’s pockets—just as they did before Epic picked a fight in 2020.

What can $83 million in legal defense fees buy? Billions of dollars in annual App Store revenue were under threat until this week.